Consider the production function $P(L,K)=2L+3K$. Use elasticity to determine the approximate percentage increase of output if the input of capital is increased by four percent, given that labor remains constant and $(L,K)=(5,10)$. (See also Exercise 1.)
Antwoord 1 correct
Correct
Antwoord 2 optie
$\dfrac{3}{4}$
Antwoord 2 correct
Fout
Antwoord 3 optie
$9$
Antwoord 3 correct
Fout
Antwoord 4 optie
$5\frac{1}{3}$
Antwoord 4 correct
Fout
Antwoord 1 optie
$3$
Antwoord 1 feedback
Correct: $\epsilon_K=P'_K(L,K)\cdot \dfrac{K}{P(L,K)}=3\cdot \dfrac{K}{2L+3K}$. Therefore, at $(L,K)=(5,10)$ it holds that $\epsilon_K=\dfrac{3\cdot 10}{2\cdot 5+3\cdot 10}=\dfrac{3}{4}$.
Then $\% \Delta P \approx \epsilon_K \cdot \%\Delta K=\frac{3}{4} \cdot 4=3$.
Go on.
Then $\% \Delta P \approx \epsilon_K \cdot \%\Delta K=\frac{3}{4} \cdot 4=3$.
Go on.
Antwoord 2 feedback
Antwoord 3 feedback
Antwoord 4 feedback